Arena report shows early skepticism

Posted by Daily Emerald Archives on Monday, Feb. 11 at 12:00 am.

A 2004 report about an earlier version of the University’s basketball arena that was far more skeptical of the project’s feasibility surfaced on Friday, and it predicted the arena could earn $4.1 million of annual income – drastically lower than the current guesses of $10.5 million to $16.1 million.

While news about the report disgruntled faculty who were promised all relevant information about the arena project, the report’s author, former City Manager Mike Gleason and current CEO of the Gleason Group, says his work is based on a completely different plan that is irrelevant to current arena plans.

“It has absolutely zero relevance because it is not even the same project that we analyzed,” Gleason said.

Because Gleason’s December 2004 report was cautious about the project, early plans for the arena were scrapped and restarted, Gleason said.

The 41-page report was completed in two parts, one that was done in August 2004 and another in December 2004. The report, which is also known as the EcoNorthwest report because of that group’s role in vetting the numbers, was obtained by economics professor Bill Harbaugh through Oregon’s Public Records Law.

University President Dave Frohnmayer said he wasn’t aware that there was a written version of the report, but he did say Gleason’s conclusions in 2004 led him to postpone arena plans at that time and start over with a new ones in the spring of 2005.

“It is so different from the present project in time, place design concepts and assumptions,” Frohnmayer said.

But are new arena plans different enough to warrant a revenue increase of as much as $12 million?

“Could they do it? Sure they could,” Gleason said. “It depends on what kind of arena they’re building … What I could say based on what I know is that ‘Geez, this is a pretty impressive arena, obviously it’s going to be very exotic in terms of its ability to perform.’”

Gleason said there are many things that could make an arena more profitable, such as designing it to facilitate different kinds of shows, increasing the total number of days the arena can be used.

Frohnmayer said plans for the arena in 2004 were “only a notion.”

Revenue projections on the arena when it was still a “notion” in 2004 were also lower by another consultant, CSL International. CSL, which is the same group that says the current arena project can earn between $10.5 million to $16.1 million annually, said in 2003 that an arena could earn between $5.9 to $8.6 million.

Transparency

Even though drastic changes have been made in the project’s cost, location and ticket pricing since 2004, it’s the report’s content draws the ire of those who have urged University administrators to be transparent about the project.

“It surprises me that this is the first time I’ve seen it,” said professor John Chalmers, head of a University Senate sub-committee that analyzed the arena project. “This would have been helpful information.”

Frohnmayer said the report was no secret, but administrators didn’t know where it was and thought so much had changed that it was no longer necessary information.

EcoNorthwest’s report notes that the University was aware of a possible $100 million donation from Phil Knight, and that if the University didn’t follow through on the planned arena, it was likely to lose that donation and probably others.

Not building a new arena could have more detrimental outcomes on the University, the report says, including the loss of coaches, impaired ability to recruit skilled athletes, deterioration of the athletic department’s finances and deterioration of the athletic department’s ability to raise donations.

But the report also points out simple comparisons between a new arena at the University and the Rose Garden in Portland. In some cases, even low revenue estimations of the University’s arena outperformed that of the Rose Garden.

From the EcoNorthwest report: “The (other) reports seem to conclude that Mac 2 will enable the University to sell more tickets at a higher price. While the new facility itself may attract attendance, the real drivers are the skills of the Oregon teams, the size and health of the local economy, the price of the tickets. Oregon’s recent experience with the now-bankrupt Rose Garden has demonstrated that consumers view spectator sports as a luxury item to be consumed only when teams are winning…”

The Rose Garden has recovered from its bankruptcy, but its struggles are a part of Oregon history.

“Of course things have changed” since the completion of that report, said professor Peter Keyes of the University Senate Budget Committee. But EcoNorthwest is “very rigorous and I think they understand local conditions. They have a real awareness and data set about what the issues are in Oregon. So I would look very seriously at anything they say.”

rknutson@dailyemerald.com